This project will address whether behavioral treatment of insomnia improves the function of two brain networks involved in emotion regulation - the executive control system (including dorsolateral prefrontal cortex - DLPFC and ventrolateral prefrontal cortex - VLPFC), and the extended limbic emotion regulatory systems (including medial prefrontal cortex - MPFC, amygdala, and insula), by reducing macro- and micro-arousals in REM sleep in posttraumatic stress disorder (PTSD). The rationale for this project is supported by the following convergent lines of reasoning: 1) Deficient emotion regulation in PTSD is a primary cause of functional impairment; 2) Sleep disturbances are associated with impaired emotion regulation; 3) sleep disturbances, including REM fragmentation, in PTSD are effectively treated with Cognitive Behavioral Therapy of Insomnia (CBT-I); 4) the favorable effects of normal REM sleep on daytime cognition depend on normal inhibition of locus ceruleus (LC) activity; and 5) there has never been an explanation for why CBT-I, which has only modest effects on total sleep time, improves executive function and associated prefrontal cortical activation. This study will test the hypothesis that CBT-I improves prefrontally-mediated regulation of emotion commensurate with improved REM sleep continuity in PTSD - a disorder in which REM fragmentation is a hallmark. We will randomize 80 men and women with PTSD to 8 weeks of CBT-I (focused on sleep behavior change and with no focus on trauma or nightmare imagery) versus a manualized active control condition that has been shown to have weaker effects on sleep than CBT-I: progressive muscle relaxation training (PMRT). We will assess function and connectivity of brain regions involved in executive control and emotion regulation before and after treatment using functional magnetic resonance imaging (FMRI) during two tasks: 1) working memory with emotional distractors and 2) facial affect labeling. A baseline FMRI will also be obtained from 40 healthy controls to provide normative data for characterizing abnormal brain activation and connectivity in the PTSD patients before and after treatment. This proposal will provide insights on the impact of REM sleep consolidation on the functioning of specific prefrontal circuits which greatly enriches our understanding of role of sleep in emotional brain function. Further, this provides important new insights into features of sleep that restore effective sensitivity to emotional stimuli where most prior work has focused on sleep duration. The pragmatic significance relates to the unfortunate fact that stigma is still a significant barrier for entering into standard PTSD treatments which ca improve emotion regulation. CBT-I is far less stigmatized, shorter in duration, and is rapidly becoming widely available with emerging mobile and remote technology. The confirmation of our hypothesis regarding the critical role of REM sleep consolidation has important implications for testing whether novel therapeutics engages a key neural target.